Purchasing your 1 st Home…

1. Purchasing your 1st Home…

2. What are your Expectations? ?

3. What we are Covering Today... Understanding Today’s Market & Trends Should I buy or wait? Is There a Loan For Me? Salesperson vs. Consultant The Process of Purchasing a Home Conclusion

4. Understanding Today’s Market & Trends

5. Howis the Market?

6. Santa Clara County Current Inventory as of 2/11/2011 2,404 - Single Family Homes 1,125 - Townhome/Condo’s Bank Owned (REO) 192 - Single Family Homes (8%) 184 - Townhome/Condo Units (16%) Short-Sales 667 - Single Family Homes (28%) 468 - Townhome/Condo Units (42%)

7. Santa Clara County Current Inventory as of 3/2/2012 1484 - Single Family Homes 411 - Townhome/Condo’s Bank Owned (REO) 120 - Single Family Homes (8%) 61 - Townhome/Condo Units (15%) Short-Sales 227 - Single Family Homes (15%) 110 - Townhome/Condo Units (27%)

9. Santa Clara County • Criteria: • All Price Ranges • Single Family Homes • Undefined Square Footage • June ‘08 Avg. Sale Price: $921,000 • Current Avg. Sale Price: $648,000 0-3 Months – Sellers Market 3-6 Months – Balanced Market 6+ Months – Buyers Market

10. Los Gatos • Criteria: • All Price Ranges • Single Family Homes • Undefined Square Footage • June ‘08 Avg. Sale Price: $1,727,000 • Current Avg. Sale Price: $1,211,000 0-3 Months – Sellers Market 3-6 Months – Balanced Market 6+ Months – Buyers Market

11. Blossom Valley • Criteria: • All Price Ranges • Single Family Homes • Undefined Square Footage • April ‘08 Avg. Sale Price: $604,000 • Current Avg. Sale Price: $454,000 0-3 Months – Sellers Market 3-6 Months – Balanced Market 6+ Months – Buyers Market

12. Stockton: A Tale of Two Cities Foreclosure Mapping - Example

13. Stockton: A Tale of Two Cities Foreclosure Mapping - Example New Construction Existing Older Homes

14. Cambrian • Criteria: • All Price Ranges • Single Family Homes • Undefined Square Footage • April ‘08 Avg. Sale Price: $678,000 • Current Avg. Sale Price: $536,000 0-3 Months – Sellers Market 3-6 Months – Balanced Market 6+ Months – Buyers Market

15. Santa Clara County Inventory – 9 Year Overview

16. Statewide Sales by Price Range

17. Should I buy or wait?

18. Return on Investment Bay Area Real Estate S&P Dow NASDAQ

19. Interest Rate Comparison You live in the payment, not the price

20. Rentals Rising in Price

21. Statewide Median Price of Detached Homes

22. 2012 Forecast

23. Chris Thornberg Former UCLA Economist & Founding Principal of Beacon Economics 2007 – “What’s the point of buying today when you can buy it for 10% less in a year? For the life of me, I can’t figure out that logic.” 2012 – “Even if you’ve been thinking about buying a condo in Vegas or buying a condo in Miami, buy now. Now is a great time to buy a home”

24. John R. Talbott 2003 2006

25. Warren Buffett “It will be the best opportunity in your lifetime”

26. California Sales of Existing Homes and Median Price UNITS/MEDIAN PRICE $ -44% UNITS/MEDIAN PRICE $ -25% -61% Median Price in 2011 = 2002 Values SOURCE: California Association of REALTORS®

27. Forbes Magazine

28. Facts: What you won’t read in the newspaper • 30% of all homes are free and clear of any loan • 96.7% of homes with a mortgage are not in foreclosure • Housing affordability is the best it has been in 20 years…

29. Interest Rates Historic Data

30. Consumer Confidence Index

31. Share of First Time Homebuyers Remains High California %

32. Multiple Offers in California

33. Five Points of Loan Qualification Credit Ability to re-pay Debt-ratio Loan-to-value (LTV/CLTV) Assets/Reserves

34. Credit • 2-Year History • 4-6 Trade Lines (At least 24 months) • Rental History (12-24 months) • No Unresolved Derogatory Credit • Mid-FICO Score of 640 or Better • (Ideal is 700-760) • Consider Credit Repair/Build Services

35. Ability to re-pay • 2-year history in the same type of work • Self-employed is acceptable with further documentation such as business license and business tax returns • Gross Income is what your qualification is based on

36. Debt-ratio • % of your income used to pay debt; including: • Proposed house payment • Taxes, Insurance • Homeowner Association Dues (If applicable) • Mortgage Insurance (If applicable) • Monthly installment payments (Auto, student loans, etc.) • Monthly revolving payments (Credit cards) • Does not include utilities, phone, food, living expenses

37. Debt-ratio Monthly Debt Payments Monthly GrossIncome = ÷ Debt Ratio Lender’s Ideal Debt Ratio33% - 45%or less = ÷ $3,500 $9,800 36% What’s YOUR Ideal Debt Ratio?

38. Loan-to-Value • (LTV) • % of the home value being loaned against • Down payment • 20% down (80% LTV) or more is ideal • Less than 20% requires Private Mortgage Insurance (PMI) • Must have a mid-FICO credit score of at least 740 • Appraisal determines value and condition of property

39. Assets/Reserves • Down Payment and Closing costs • Reserve savings (equal to at least 3-6 mos. of proposed house payments; P.I.T.I.) • It must have at least 2-months of “seasoning” • 401-k/retirement accounts can be used for reserve • You must have the down payment and closing costs in a liquid account • Gift funds can be up to 3% of purchase price; which requires the giver to write a “gift letter” stating it is a gift; not a loan

40. Salesperson vs. Consultant

43. A ConsultantDoes Three Things: • Consult and Advise: • Asks profound, insightful questions, because the typical agent or lender might not ever take the risk of asking you those types of questions. A consultant will probe and inquire and discover what is really important to you! • Will appropriately define the problems and differentiate the essential objectives from less relevant concerns. • Anticipates likely obstacles to achieving your objectives and identify sensible means to circumvent them

44. A Consultant Does Three Things: • Negotiate: A consultant: • Treats your money like it’s their own, because when it is time to save or make you money, they need to be like a "pit bull". Money is an emotional issue, representing yourself while purchasing a home can be compared to performing surgery on yourself– it’s not a great idea… • When dealing with your money, will critically examine the accuracy of the underlying assumptions. While negotiating for you, the consultant will skillfully articulate the strengths and weaknesses of each situation that may arise. • Recognizes the likely underlying agendas and motivations of individuals that are involved in the situations. Consultants also anticipate the likely emotional reactions of individuals and understand how to communicate and troubleshoot issues. • Will appropriately articulate the essential flaws in the arguments of others and reiterate the strengths of your position. • Recognizes when it's appropriate to resist the objection of others and remain committed to a sound course of action

45. A Consultant Does Three Things: • Overseer: • Every transaction has 100 to 150 phone calls alone. Each one of them loaded with critical details. Every "i" must be dotted and every "t" must be crossed. There are 41 different people from 14 different industries that are involved during the each stage of your transaction. • Buying a home can be compared to flying an airplane across the country. The consultant is the pilot of your plane and you are the passenger – you can expect turbulence along the way. As your pilot, the consultant’s role is to oversee all of the small (but important) details. A good consultant will be able to see things from multiple perspectives and identify any likely unintended consequences of your decisions.

46. The Process of Purchasing a Home

47. The Process of Purchasing a Home • Banker & Realtor Selection • Pre-Approval with a lender • a. Establish a pre-approval price range based on your payment comfort level • Setup a meeting with your Realtor to establish your home purchase requirements • Start viewing homes • Upon selecting a home, you will make an offer • Upon acceptance of a purchase contract, the escrow period will begin and you will make a deposit to secure the home. The contract will have a timeline defined to conduct the necessary inspections, appraisal and finalize your loan and interest rate.

48. The Process of Purchasing a Home • Upon the completion of your inspections, appraisal, full bank approval and your review of each report, you will decide if you are comfortable with the current contract terms. If something new was discovered, you can re-negotiate the contract until you feel completely comfortable with the agreement. • Once you are ready to proceed forward (with or without another negotiation), you will fully commit to the seller for the purchase of the property or elect to exit from the agreement. • Once you fully commit to the purchase, if you withdraw from the sale (for any reason) your deposit will be at risk and subject to negotiation between you and the seller based on your reason for contract termination.

49. The Process of Purchasing a Home • Next, you will sign the loan documents at the title company and provide your down-payment. • Next, your sale will complete after a total time period of approximately 30-60 days depending on the loan type. • You receive the keys to your new home!

50. The Mortgage Process: You will gather your required loan documentation Setup a meeting with a mortgage consultant to review the various loan options The mortgage consultant will run your credit report A loan application is then completed and some disclosures are signed Analysis will be run based on your financial profile A Good Faith Estimate and Truth-in-lending statement will be provided to you outlining the estimated projected costs We will conduct an appraisal to verify your purchase price against market conditions/comparable properties Your loan is then submitted for final processing/review The lender approval will arrive with their conditions to issue the loan; then your contingencies are removed Final documents are signed at the title company Your loan is wired/funded to the title/escrow office This process takes approximately 30-60 days